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Workers Comp Worries

Companies can take a proactive approach to containing workers compensation costs, as well as push for changes in state regulations.

When it comes to corporate insurance coverage, one persistent sore spot is workers compensation. Fifty-nine percent of employers say they’re very or somewhat worried about the cost of workers compensation insurance, according to a recent survey by financial software provider Zywave. Joyce Long, global practice leader for Marsh Risk Consulting’s workforce strategies group, says companies’ efforts should start during the hiring process with a good description of the job they’re filling, including physical requirements.

Once the hiring is accomplished, Long emphasizes the importance of training new employees: “You have to provide them with the safety rules and training for the job they’re going to be performing and the work area they’re going to be in.”

Michael Stack, director of operations for Amaxx Risk Solutions, which provides workers comp publications and data, says companies need to take a hands-on approach even if they’ve outsourced their program to a third-party administrator (TPA).

“We find that most people really abdicate their responsibility as far as workers compensation is concerned,” Stack says. They “hire a TPA [and say], ‘They’re now responsible for it and I’m done.’”

Fixing a workers comp program can seem “overwhelming,” Stack says, but “you take it one little step at a time.” That can be “something as simple as implementing a better safety program,” he says. “Second is just getting employees back to work sooner.”

Richard Victor, executive director of the Workers Compensation Research Institute (WCRI) in Cambridge, Mass., points to another approach to containing costs: pushing for changes in state regulations. “Workers compensation is a creature of state laws, and the laws and regulations have a large effect on costs,” he says.

Maximum medical prices are set by state regulation, and there are big variations from state to state, Victor explains. “In Florida, surgeons are paid about 40% over what they get from Medicare in Florida,” he says. “In Illinois, they get six times the Medicare rates.”

WCRI research shows that the same group of workers comp medical claims for the same employer would cost an average of $5,000 in Indiana, $7,000 in Iowa and $13,000 in Illinois.

“It’s tough for an individual company to do, but coalitions of companies have demonstrated significant success” in changing state regulations, Victor says. “California is a prime example.”

If the rules don’t change, there’s always another state. When Peoria, Ill.-based Caterpillar announced plans earlier this year to build a plant in Georgia, the company said its home state wasn’t in the running because of its workers compensation rates.

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